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Navigating layoffs: What is the true cost of business?

In today’s volatile business landscape, layoffs have become an unfortunate reality. However, when handled poorly, they can do more harm than good, eroding a company’s culture and long-term prospects.

Are we in for a layoff-peppered corporate landscape in 2024? If economic forecasts and leader expectations hold, the answer is leaning toward yes. But before releasing employees, executives and hiring managers need to think long and hard about the decision. Though laying off people might seem like a clear option, it’s often a short-term default move that comes with long-term negative repercussions.

Just how many businesses admit to looming layoffs within the coming year? According to recent research, 52% of companies say they’ll be handing out pink slips soon. The reason isn’t shocking: We’re saddled with economic uncertainties brought about by rampant and uncertain inflation. That’s not up for debate. But what should be up for discussion is whether layoffs are always the right call.

It’s essential to remember that a layoff has the power to create a ripple effect on an employer or brand. This often leads to enduring PR nightmares, which runs up costs and hurts reputation. Frequently, the underlying cause for all the bad feelings comes with the handling of the situation. For instance, good employees all too often are escorted out with no notice or chance to say goodbye to their customers, clients, or peers. As a result, they jump on Facebook or LinkedIn to share their displeasure or to say their goodbyes to people they’ve worked with...

In turn, this starts a conversation that leaves a lasting stain on the company. Scrubbing away that type of stain can be tough. How do you prove you genuinely value your people (as many employers claim in their mission statements) when you treat them disrespectfully during a difficult career moment? You can’t. And employee morale suffers because remaining team members realize that their worth to the company is less than they’d been led to believe.

All corporations have an ethical responsibility to be fair with the workers they hire. This principle must be followed in all situations, and especially in heartwrenching ones like layoffs. Empathetic approaches may require more thoughtfulness and planning. However, they help everyone feel calmer and less maltreated during stressful layoff periods.

Of course, if you can avoid a layoff altogether, that’s a better strategy than leaning into one out of a knee-jerk reaction. Interestingly, many layoff alternatives are quite acceptable, even to shareholders. Not only do those alternatives keep the layoff beast at bay, but they can increase the engagement, passion, and purpose of personnel.

Considerations to Trim the Fat Without a Mass Layoff
Before ever announcing a layoff, remind yourself that other solutions could be on the table to achieve the bottom-line goal, which is typically to cut costs. However, the first step toward being proactive and innovative is a tough one to master: You must get over the fear of being transparent with your employees about your company’s financial struggles.

Leaders tend to take the wheel when times get tough. In a potential layoff, they need to let everyone else chime in and help steer a listing ship into smoother waters. If you’re someone who’s accustomed to doing everything yourself and making unilateral decisions, you’ll need to push at your comfort zones and step outside of your usual leadership tactics.

How does this work? Let’s say you hired great people and they’re doing great work. The only problem is that you’re not getting enough revenue to pay all your bills. You know that a quick way to resolve everything would be to reduce headcount by 10%. Prior to making that move, though, you engage your team, beginning with your leaders.

Explain the predicament you’re in and ask them for thoughts on where to cut costs within a specific deadline, such as 60 or 90 days. Tell them that you want no one to lose a job. You’ll find that when you’re open, you’ll get a lot of interesting and useful feedback.

During the last recession, we worked with a flooring manufacturer that was facing the prospect of laying off workers. They didn’t. They applied creativity to the problem instead, starting with what they called voluntary “rolling right-sizing” measures. Some people reduced their workweek hours, others took vacation, many would go on a week of unemployment at a time. These approaches kept the business operations moving forward and they rode out the recession. During any given week, they had fewer people working than they did pre-recession. Nevertheless, no one got laid off.

Granted, they did other clever things as well. They gave packages to people who were interested in transitioning into a different occupation by going to school or retiring. Everyone pitched in and worked in tandem. All because the employer saw more than just the single choice of laying off a certain number of team members. If your culture is really strong, you’ll engage the entire team in the discussion.

Handling Unavoidable Layoffs
Though I’m a proponent of taking unique steps when layoffs are on the horizon, I’m a realist, too. Layoffs can’t be completely eliminated. Sometimes, they do come with the territory.

Case in point: In the tech world, layoffs have been particularly hard on the working population. In late 2023, TechCrunch released a comprehensive list of all the tech companies that had let staff go. The only good news was that the bulk of worker reductions happened at the beginning of the year and seemed to trickle off month after month. But that doesn’t mean that 2024 will be a cakewalk.

The point is that you may have to make a judgment call that leads to layoffs. If that occurs, aim to move forward with empathy and treat your employees with dignity and grace. Take a human-centered — not a cost-centered — approach.

Where can you begin? The steps outlined here can contribute to a layoff experience that upholds the humanness of the participants involved. Each step is designed to engage your workforce from a strength-based perspective so you can overcome your challenges and emerge from your crisis with a more united, resilient organization and culture.

1. Proactively and clearly communicate your intentions.
From the very beginning, foster an open dialogue between you and your workers. Share your financial realities and other circumstances that are necessitating layoffs. This honest communication needs to come well before your layoffs, though. You shouldn’t just “spring” a layoff on your people.

After announcing your intentions, establish feedback channels for employees to share suggestions, concerns, and questions. This helps generate ideas and foster a more inclusive, respectful conversation.

You may even want to engage employees to think proactively about ways to streamline things to either avoid the layoff or minimize it. You never know what people may come up with. Your workers may toss out ways to adjust while staying agile that you never even contemplated. Collaborative problem-solving prompts a shared sense of sacrifice, which can fuel unity as well as preserve jobs.

2. Lead with empathetic, compassionate execution.
If layoffs are inevitable, approach each employee situation individually. By understanding and acknowledging the personal circumstances of each affected employee, you can offer extra support in a personalized, sensitive way. For example, some workers may benefit from outplacement services, connections to other companies in the community, counseling, or reference letters.

Above all else, make sure everyone who is laid off receives a dignified exit. This means giving advance notice, offering fair severance packages, extended benefits, and a myriad of resources. It may also mean hosting potluck lunches and happy hour send-offs. Remember, people aren’t leaving in disgrace. Oh, and don’t forget about the people that are left behind. Employees can feel a wave of “survivor guilt.” Even if they see a lot of “happy leaves,” they may lose motivation to stay productive or disengage.

Demonstrate your commitment to all your employees by allowing them to grieve appropriately and encouraging them to maintain relationships with their former coworkers. You might even want to set up an alumni network — it’s a terrific way to make parting less difficult and stay connected with top talent when you’re looking to hire again.

3. Reflect on the experience to reduce unemployment.
After the layoff process, conduct a thorough review. A review helps you understand the impact from a comprehensive viewpoint. Analyze what went well, what you could have done better, and what the results were. The insights you gain from this review will ensure that your leadership team remains on a continuous learning curve.

This certainly won’t be the only tough time you’ll encounter. Debriefing on how everything went can improve the way you react to other problems that come up. The best leaders are ones who keep evolving. The only way to do that is to be honest with yourself.

Post-layoff is a good time to reevaluate your structure and workflows, too. A good example might be to make it clear that no leader should go straight to layoffs without exhausting all other channels as soon as uncertainty hits. That way, you might be able to avoid the same issue months or years down the road. You can take it a step further and make it a practice that when someone on the team leaves, engage the rest of the team on what’s really needed going forward. Sometimes you’ll find you can streamline processes or eliminate non-value added tasks and don’t need to replace the position afterall.

I have always appreciated the Southwest Airlines motto of people coming first. Nowhere is it more essential for you to put that into practice than when the word “layoffs” lands in your lap.

*Conducted by Resume Builder

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